£1.2bn Caledonia investment trust to adopt more concentrated mandate

The manager of the £1.2bn Caledonia Investment trust is aiming to increase its yield by revamping it into a more concentrated portfolio.

Will Wyatt has restructured the trust into six distinct pools of capital – quoted, unquoted, Asia, property, funds, and income and growth – which will be run by different managers.

He will also cut the number of holdings from 68 to 45, while boosting exposure to high yielding global companies, reducing the trust’s emphasis on growth picks.

The manager wants to boost the portfolio’s yield, currently 1.9%, nearer to the FTSE All Share yield of 3%. 

“We are one of only a handful of companies in the UK that has increased its dividend every year for more than four decades,” said Wyatt.

“However, this strong capital growth has meant our current dividend yield at 1.9% is now too low and lags the market significantly.

“We have, therefore, decided to invest in a portfolio of large capitalisation global companies that offer a significant yield while retaining good medium-term growth prospects.”

Wyatt said he plans to build up larger stakes in holdings and will dump those that make up less than 1% of the portfolio. 

“In a concentrated and long-term portfolio such as ours, the main drivers of performance are the larger investments.

“The number of investments in our portfolio is too large and many are sub-scale and therefore unlikely to make a significant impact.

“We are now set to keep the minimum size of new investments above £10m.”

Wyatt added he will look to increase exposure to the income and growth pool of the trust from its 1% weighting up to 10% later this year if there is a correction in the FTSE 250.

He also plans to add 5% to Asian stocks to tap into the country’s rapid growth.
“In the UK, the FTSE 250 looks expensive by historical standards, but should there be a major correction in markets we will be set to build stakes in a number of UK quoted businesses,” said Wyatt.

“Instead, this year we will continue to look for new opportunities in Asia with the aim of increasing further our exposure to this fast growing region.”